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Jim Cook



Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

Best of Doug Noland
April 20, 2011
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I am of the view that we have likely passed a tipping point where China and the “emerging” economies now exert increasingly strong inflationary pressures upon the global economy.  Rapidly growing developing world incomes would tend to support elevated energy and commodities prices, while ensuring an upward inflationary bias in much that is produced globally.  The cheap wages and low cost structures that combined with cheap finance to ensure seemingly endless goods seem to have run their course.  It is worth noting that U.S. March import prices were up 9.7% y-o-y, with Producer price inflation trailing somewhat at 5.8%.

The Fed sees things altogether differently, clinging to the notion that the recent jump in energy and commodities prices will have only a “transitory” impact on inflation.  They view “inflation” through a myopic focus on “core CPI” - and just don’t discern much having changed in the world.  But when I examine global price pressures, I see important dynamics that have been years in the making.  The confluence of a persistently weak dollar, booming real and speculative demand for commodities, massive “hot money” flows, and rapid Credit and wage growth throughout the increasingly powerful “developing” world is in the process of fundamentally altering global price structures.  Meanwhile, developed world structural debt problems and vulnerable recoveries ensure unrelenting monetary looseness.

Yield charts for Greek, Irish and Portuguese debt suggest that the world is neither oblivious to structural debt problems nor the difficulties in trying to rectify them.  At the same time, expectations for ongoing near-zero Fed funds place a low ceiling on Treasury (and related) yields.  I would argue that a heavily distorted “Bubble” market for determining U.S. Treasury yields disregards risks associated with U.S. structural debt issues and a rapidly deteriorating inflation backdrop.  One of these days, China and fellow Brics nations may arrive at the conclusion that the best hope they have for reining in “hot money,” surging commodities prices, and increasingly unwieldy inflation is to back away from supporting our debt markets